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China calls for early conclusion of consultations on the code of conduct in South China Sea.
Iran warns the United States against attacking its nuclear and sensitive sites.
And China is making contactless customs clearance become a routine.
Hello and welcome to World Today.
I'm Dou Hongyu in Beijing.
To listen to this episode again or to catch up on previous episodes, you can download our podcast by searching World Today.
Our first story.
Chinese Foreign Minister Wang Yi has described the South China Sea as a shared home for regional countries during a meeting with ASEAN Secretary-General Cow Kim Horne.
Wang said recent Philippine provocations serve the interests of external forces and undermine the improvement of China-Philippine relations.
Wang said China stands ready to work with the Association of Southeast Asian Nations to foster a new narrative of peace, stability, cooperation and friendship in the South China Sea.
He also discussed the issue with Malaysia's foreign minister, saying the early conclusion of consultations on the code of conduct in the South China Sea will help safeguard peace and stability in the region.
The Chinese diplomat is in the Philippines to attend a China-ASEAN foreign minister's meeting.
Now for more, we're joined by Warwick Powell, adjunct professor at Queensland University of Technology.
Thank you very much for joining us, Professor.
On Monday, Philippine personnel from an illegally grounded vessel harassed a small China Coast Guard patrol boat near China's reef Ren'ai Jiao.
Chinese Foreign Minister Wang Yi says some Philippine military personnel and police deliberately create maritime trouble to serve outside forces.
So who do you think Wang Yi was referring to when he mentioned outside forces?
Sitting behind the political elite in the Philippines is
United States and this is a pattern of behavior that the United States has undergone over many decades in many parts of the world where it seeks to stir up troubles and generate instability in regions so as to firstly create an
An excuse, if you will, for continued American presence and interventions, and, of course, to create less than conducive environment for those that it views as adversaries and competitors.
And this is not the first time.
What impact could these repeated maritime incidents have on China-Philippines relations and our security in the South China Sea?
Look, I think in terms of bilateral relationships, it clearly disrupts
Normal bilateral relationships between countries, it certainly can lead to levels of distrust and hostility between not only political leaders, but also the people of the countries themselves.
So I think one of the risks of persistent, repeated
Incidents such as these, even if the incidents themselves are relatively small scale, ultimately can lead to a corrosion of goodwill amongst people.
And that's a very challenging set of circumstances, particularly when countries are in effect neighbors with each other.
So that's the first thing.
I think in terms of peace and security in the region, it's important to keep these particular incidents in context.
These are relatively minor types of incidents.
Certainly when you compare them with, for example, the United States torpedoing or bombing,
Speed boats, ostensibly under the name of anti-narcotics activities in Venezuela, or interdicting ships on the high sea, or running blockades against Cuba, and of course, dropping bombs and missiles on countries like Iran.
Compared to American interventions,
These are relatively small-scale events.
They typically lead to, at worst, minor injuries, but they do create footage that plays very, very well on social media, which, of course, is really the principal aim of this.
To keep these kinds of incidents in context is important.
If countries are to ensure that they don't overshadow the broader issues in common that they have with each other, particularly given their shared relationship to this body of water.
And the timing of the incident is interesting because it occurred just ahead of the China-ASEAN foreign ministers meeting.
Do you think it was merely coincidental or intended to influence discussions on the South China Sea?
It's unlikely to have been coincidental.
The timing of the incidents
Was such that it no doubt will have ripple effects that would disrupt and cloud the discussions that would otherwise be taking place.
And that, of course, is one of the intentions, is to leverage Philippines' revolving position as the chair of ASEAN this year to elevate discussions
Their national interest, narrowly defined issues to the top of the agenda in an effort to overshadow the broader and ongoing engagement between ASEAN nations and China.
Now, considering current maritime tensions, why did Chinese Foreign Minister Wang Yi say that early conclusion of consultations on the code of conduct is important?
Well, it's part and parcel of ongoing efforts to bring structure and shape to
The ways in which the countries impacted around the South China Sea aim to interact with each other in relation to disputes.
So in that sense, it would be an important closure of what has been a negotiation process that has taken a long time and which all relevant countries have been
Making long-term goodwill efforts towards.
And being able to achieve this as an outcome in the face of ongoing attempts to destabilise the relationships in the region as a result of third party intervention, I think would be a significant message to others that
Notwithstanding their attempts to destabilize and disrupt orderly relationships amongst countries in Southeast Asia and China, that the countries are able to continue to work towards the kinds of constructive relationships that they ultimately understand is in their common nationality.
And now what are the biggest challenges, do you think, standing in the way of a final agreement here?
Agreements are reached not only in terms of agreement on the substantive issues, but I also arrive that because there's goodwill.
So creating the right conditions and the right mood is a necessary part of
Overcoming any barriers or hurdles that may exist for parties to arrive at a common agreement.
And I think part of the problem at the moment is that the particular leadership, the political leadership of the Philippines has been egged on by others, particularly those in the United States, to
Behave in ways that are not conducive to the kinds of moods that are necessary to help progress difficult negotiations that have taken a long time towards their finalization.
In fact, it would seem that the Philippines, in the way that it's carrying on, does not want
A resolution to the long-term negotiations on the Code of Conduct.
It's as if they want to sabotage these discussions, which of course would undermine the interests of all of the other parties at the same time.
So I do wonder whether or not the political leadership in Manila
Really understand what they are actually doing.
It might play well to a domestic nationalistic audience.
It might certainly play well for President Marcos Jr. in terms of his relationships with Washington.
But I'm not sure that it plays very well in terms of Southeast Asian peoples and the countries of Southeast Asia and China.
Then talking about ASEAN, the South China Sea is one of the most sensitive issues in China-ASEAN relations.
To what extent has it become a test of ASEAN's ability to maintain unity while balancing the interests of its member states?
This is a test for ASEAN, and it's a test
That has been pushed onto ASEAN by parties that have an interest in destabilising and undermining ASEAN unity.
The fact of the matter is that ASEAN has been a quiet achiever over many decades in terms of creating the context for sustained regional cooperation.
Peace and prosperity and economic development.
It does so in a way that does not always draw the attention of global eyes, and it's because it pursues its agenda of coordination, harmonization, and ultimately collaboration in a discreet manner.
Consensus driven way.
Now, when ASEAN is strong and united, it presents to external parties a certain strength, a core that speaks on behalf of the region in ways that can push back
On external forces that seek to influence how the region conducts its own affairs.
There was a time where there was an Asia before the Europeans and an Asia before the Americans.
And one of the things that the colonial powers dearly wishes to keep hold of is their own position within Asia.
And destabilising and disrupting ASEAN unity is one of the ways in which they try to do that.
China and ASEAN have remained each other's major trading partners with many areas of cooperation.
How can these two sides prevent maritime disputes from overshadowing their cooperation in trade, investment and regional development?
Well, I would suggest that the parties put it the other way, which is how to ensure that ongoing economic collaboration, infrastructure development, expanding trade, investment flows, etc., etc., be made even more prominent as part of how ASEAN and China interact with each other.
That ultimately...
Will deliver for the people of the region and the countries in the region, improve living standards and greater certainty and stability.
So I would suggest that, in fact, it's not an issue of ensuring that maritime disputes don't overshadow things.
I would put it the other way.
Let's make sure that the economic development
Alignments and opportunities and needs actually have the prominence that they deserve because at the end of the day, the quality of life, the standard of living of the people across the region can only be advanced through more intensive collaboration and greater integration.
And this, I say, particularly in the context of the instabilities that exist today with the Iran war and the disruptions, the global oil markets, the challenges of artificial intelligence and the need for countries to work together to make sure that artificial intelligence doesn't become a problem.
That overruns the capacity for people to make use of technology and, of course, for the region to successfully reduce its dependency and risk exposure to instabilities in the global hydrocarbons market.
Thank you very much.
That was Warwick Powell, adjunct professor at Queensland University of Technology.
Coming up, Iran warns the United States against attacking its nuclear and sensitive sites.
This is World Today.
Stay tuned.
A Chinese company stepped in to save British steel when few others would.
Six years later, the UK government stripped it of control.
Was this a commercial decision or another sign that geopolitics is rewriting the rules of global investment?
What comes next?
Who ultimately stands to pay the biggest price?
More importantly, what could cases like this mean for the future of global investment?
Join us for an in-depth discussion of the British steel nationalization saga on this week's Chat Lounge, wherever you listen to podcasts and on CGTN Radio.
Welcome back and you're listening to World Today.
Iran has warned that if the United States attacks its nuclear and other sensitive sites, Tehran will expand its strikes and target U.S. and its allies' interests across the region.
The warning came in response to a threat by US President Donald Trump that US forces would pretty soon strike an Iranian nuclear facility.
Iran said if the US Army enters such a phase, Tehran will consider it as an expansion of war
And launch a powerful attack against the interests of the United States, its allies and supporters.
Meanwhile, Yemen's Houthi group has declared a naval blockade against Saudi Arabia.
The group has warned international shipping companies that vessels trading with Saudi ports could face military action.
Now for more, we're joined by Dr. Wang Jin, Middle East expert in Xi'an, China.
Thank you for joining us, Dr. Wang.
It's my great pleasure.
First of all, why has the United States publicly threatened to launch strikes against Iran's nuclear facilities this time?
I think actually it's a kind of a threat.
For me, the war is still going on between the United States and Iran, but the warfare is still concentrated over the areas near the Strait of Hormuz.
And what is happening during the past days, I mean, the past 72 hours actually become further surprising because United States, the targeting areas started to expand it very quickly to other parts of Iran, where also Iran's counterattacks
Try to target other bases of United States in other parts of the region, I mean the whole Middle East.
So that's why actually both United States and Iran now they are facing the very critical moment of possible conflict escalation
And against this backdrop, United States, of course, their kind of expression way by the leader is that they try to threaten Iran, that if the war continues, they might further escalate the tension by attacking Iran's
Nuclear facilities directly.
And also from Iran's perspective, they believe this threat should be deterred.
So that's why their rhetorics are also very assertive.
So that's why not only what we are looking, what they are witnessing is not only a situation of the conflict is now becoming more and more escalating, but also the rhetorics
Used by United States and Iran against each other also become more and more aggressive.
So that's why the situation now become very critical and the possibilities of escalation is also growing very rapidly.
Then how credible is Iran's warning?
It says if the United States attacks its nuclear facility, it will consider it as an expansion of the war in the West Asia region and would trigger a broader response.
How credible is that?
And what forms of retaliation might Iran pursue?
Well, I think Iran's rhetoric is very rational.
They didn't try to provoke United States anger actively.
They just want to prevent these kind of the possibilities of escalation not realized by Iran's own kind of the threats.
They want to deter and they want to prevent it from being happened.
But the problem is that as we just mentioned, United States now is the rhetoric of threatening become more and more salient, more and more apparent.
And Iran has to make some kind of defendant.
Actions as well as defendant rhetoric against the United States to try to pretend and not become realized.
But unfortunately, if these things become reality, I think Iran will do a lot of things, try to launch counterattacks.
And on the one hand, I think Iran could
Mobilize its allies in this region, particularly the Shia militias belong to the Hashdash Abbey, which is the mobilization people's mobilization units, the Shia militias inside Iraq to open the new frontiers.
Against the United States targets inside Iraq, as well as other parts of the region.
And also, on the other hand, I think Iran could launch missiles and drones against the targets, not only in the Gulf Arab states, not only in Jordan, but also maybe in other parts of the region because Iran's missile range
Is far enough to target any United States military bases in this region.
And also Iran might also relaunch
The attacks against the targets inside Israel.
So Iran still has a lot of measures to be taken, could be taken to deter the possibilities of United States efforts for escalation of tension.
But again, I don't think Iran wants a war and the conflict to further be escalated.
Iran just want to use a very strong and assertive rhetoric
To prevent these kind of the possibilities of escalation be realized.
The recent developments come despite a peace memorandum under which Washington and Tehran were expected to continue negotiations.
But are there still prospects for restoring dialogue?
We hope so.
Let's be frank.
We hope so.
And to be short, we don't know.
We don't know what will happen next.
And we hope that the peace efforts could be introduced.
As quickly as possible.
And we hope that the peaceful efforts could be introduced to establish the communication channel between the United States and Iran.
But actually, we don't know what will happen next because the United States attacks against Iran become more and more aggressive.
And assertive, which makes the situation very fragile.
And also Iran's counterattacks further, to some extent, drag many countries in this region into the conflicting circle.
For example, Bahrain, COVID,
The Emirates, Oman and Jordan, and maybe other countries in the future, which also to some extent weaken the confidence and the willingness of the regional efforts for peace coming back.
So we hope, of course, we hope that the memorandum of understanding, which was signed by United States and Iran not long ago, could work as a very bridge for the communication and for the mechanism of negotiation
Coming back.
But we are not sure whether or not it will work.
We hope that the war should not be further escalated, but if the war continues, if the conflicting areas further expanded, the intensity of the war further escalated and increased, it will make nobody safe in this region, of course, including United States and Iran.
Moving to Yemen's Houthis, they have justified their maritime restrictions on Saudi Arabia as a response to the conflict in Yemen, while Saudi Arabia rejected that claim.
How does the Yemen conflict continue to shape the security of the Middle East?
I think Yemen's situation should be understood and interrupted as a further expansion of the region, expansion of the conflict in this region.
Because if you look at what happened during the past two or three years,
The relations between Yemen Husi and Saudi Arabia, the relation between Yemen Husi and the Yemen government supported by Saudi Arabia become to some extent stable.
As it became stable because they don't want to restart the war with each other.
They just want to keep the stability and peace with each other.
I don't mean that there is no crisis, but the crisis largely concentrated on the relations between Yemen Houthi and Israel, between Yemen Houthi and United States, not between Yemen's different factions themselves.
But now this time, the relations between Yemen Husi and the Yemen government become dangerous again.
And further, that relations between Yemen Husi and the Saudi become dangerous again.
These things which led to Yemen Husi's decision to close to some extent.
The strait of Amman to the ships coming from or to or had close relations with Saudi Arabia.
So which further worsened their relations with Saudi Arabia and Yemen Houthi and could further lead to escalation of tension and the possible warfare between two sides.
So that's why the tension between the United States and Iran now further expanded to other parts of the region, particularly inside Yemen, and will make nobody safe, particularly for the different factions inside Yemen, as well as the relations between Yemen, Houthi, and Saudi Arabia.
And finally, if tensions continue to rise in both the Strait of Hormuz and the Red Sea, what could be the implications for the world?
We hope that it will not be further escalated and further expanded.
But unfortunately, if anything continues and without the very helpful efforts, the peaceful efforts coming from the third party, we have to be prepared both physically as well as psychologically that the situation in the street of Hormuz
The situation in the Red Sea will be in danger.
And that means that on the one hand, the transportation system globally will be in danger.
And also on the other hand, the energy transportation and the energy producing system in this region will also be in danger.
So global oil will be further rise and price will further rise and which lead to the inflation prices of the of the markets globally
So that's why i think we may hope that the peace will come back
The stability will maintain but we have to prepare it for the possibilities of the crisis coming back as well as with the instabilities
Further be increased.
We have to prepare for that.
Thank you very much.
That was Dr. Wang Jin, Middle East expert in Xi'an, China.
You're listening to World Today.
We'll be back after a short break.
Hello, my name is Alessandro Golombievski Teixeira.
I'm a professor of Public Policy Management at Tsinghua University in Beijing.
I am a great listener of The Wall Today.
In my opinion, The Wall Today is one of the best China radio programs.
In the world today, we can get the best news and analysis in what is happening now in the world.
So please, come to join us!
You're listening to World Today with me, Dou Hongyu, in Beijing.
China is aiming for contactless customs clearance to become routine by 2030.
Customs authorities said they will leverage institutional innovation and technology to improve efficiency and management within the next five years.
More than 90% of ports will be equipped with smart inspection devices, and they will empower customs operations along with artificial intelligence and big data.
Head of the General Administration of Customs of China Sun Meijun made this announcement at a news conference on Wednesday.
For more, we're joined by Professor Liu Baochuan, Director of the Center for International Business Ethics and the University of International Business and Economics.
Thank you for joining us, Professor Liu.
Yes, it's a pleasure.
Thank you.
With the 15th five-year plan, artificial intelligence, big data, and smart equipment will be widely deployed in customs work.
So what does more efficient customs clearance mean for global businesses, especially small overseas companies?
I think this is really a capture all benefit to the business community, either directly engaged in global trade or indirectly engaging in the sourcing of supply and shipping the industrial cluster.
Specifically for big multinational companies, the AI-enabled customs reduce the clearance time, reduces the paperwork, and reduces the inventory cost.
So goods can move more quickly through the supply chain,
And they can engage more in confidence with the just-in-time manufacturer and avoid disruption.
As you mentioned, for the SMEs, the small and medium-sized businesses who are dealing over trade, particularly in the e-commerce, the benefits are even greater.
Traditionally, customs compliance has been quite a much a headache for these companies and they need to pay extra cost to hire professional companies to deal with such a social service.
Now, once they get online, they can get all the information dealing with digital declaration.
And also they can automate some of the risk assessments so with such a countless clearance lowers all the administrative cost and
It makes them more accessible to the international marketplace.
So all in all, I think this is not only a matter of quick, the movement of goods, but rather it shows a strong gesture for China to show to the world
That we are engaging in more predictable and transparent type of operation as the customers to facilitate international trade.
China says now around 140 million people have already shopped globally through cross-border e-commerce platforms.
How can smart and contactless custom services better support the development of cross-border e-commerce and also consumer experience?
Both businesses and consumers, they would calculate the speed of delivery, the reliability of both quality and delivery and also the cost that can incur in the logistic process.
So customers today, they expect international deliveries almost as quickly as domestic ones.
So smart customs can shorten processing time, allow the parcels to move across border faster and efficient, and with also less of the losses
In the goods and also in the quality.
So AI can automatically classify the products and they are also able to verify the declaration system, identify some of the potential risks before the goods can arrive at the ports.
So combined with electronic documents and also the real time tracking, customers gain far more confidence into the entire delivery process and hence engage more proactively in the international trade and individual commerce.
So for the platforms and merchants, lower the clearance cost means more competitive pricing, and also they can offer broader categories of products for customers to select.
So therefore they can really facilitate return and bring better after sales service and particularly for the small value cross-border trade it can create more of the drive for entrepreneurship you know both at home and also with globe
With all the globe in terms of the partnership.
Then turning to the overall foreign trade, in the first half of this year, China's foreign trade grew nearly 17%, with exports maintaining growth for 11 consecutive quarters.
So what are the major factors behind the continued growth of exports in recent years?
Well, the foundation of the Chinese manufacturing competitiveness is not only there to stay, but rather to continue to improve.
So with the high quality manufacturing, so the electronic vehicles, batteries,
The chips and the renewable equipments, et cetera.
So this can really creates the continue to beef up the China's bargaining power on a global marketplace.
And secondly, I think the Chinese companies are very savvy and agile to international opportunities.
They have already diversified the marketplace and also built more of the alternative supply chain, despite some of the interruptions.
So the third reason is that innovation has become so strong and companies are not only exporting the physical products, but increasingly they offer more of the integrated solutions, including the digital technology, intelligent manufacturing,
And also the after-sales service, and this also goes along together with their outbound investment decisions.
So when China continues to improve the business environment through trade facilitation,
The custom modernization can also boost logistic efficiency, lower transaction costs, and hence continue to support the competitiveness of the Chinese business community in engaging with the world.
And finally, within one minute, China's imports grew by 22%.
What has contributed to this sharp growth?
I think one reason is that China's economy is highly interdependent with the rest of the world.
We buy more of the raw materials and the components.
So that we are able to exercise our manufacturing capacity, but we also are importing a lot of the updated technologies and the precision equipments
And together, second is that the Chinese consumer drive is there to be the mainstay so that they are looking for more varieties, more of the high quality goods.
And so the third is that China continue to open a store, reducing the tariff, reducing
The other non-tariff areas so that customers have better access to the global supplies.
Thank you very much.
That was Professor Liu Baocheng, Director of the Center for International Business Ethics and the University of International Business and Economics.
This is World Today.
We'll be back.
Europe is experiencing a summer of record-breaking heat and is driving a surge in demand for Chinese-made cooling products.
From air conditioners to handheld fans, Chinese manufacturers are seeing booming sales across Europe.
China's air conditioner exports to the European Union reached US$3.8 billion in the first half of the year, up 43%.
Exports of portable air conditioners that do not require professional installation increased by over 70%.
For more, my colleague Zhao Yang spoke with Li Lun, assistant professor of economics at Peking University.
Professor Li Lun, thank you very much for joining us.
Europe's heat waves have led to a sharp increase in demand for Chinese-made air conditioners and cooling products.
So what does this tell us about how climate change is beginning to reshape the global trade patterns and consumer demands?
Yeah, so, you know, climate change is definitely creating a lot of new markets.
So, for example, in Western Europe, the June in 2026 is the hottest June on record.
Basically, the average temperature is almost three degrees above the average between 1990 to 2020.
So in this weather, you know, products such as air conditioner,
Such as fans and all the cooling devices, basically, they are becoming part of this new economy that's adapting to this new climate.
And I think, as you mentioned, the geography of consumer demand is also changing because air conditioning was historically only concentrated in much warmer economies, but a lot of European homes
Basically, they're starting to adapt this device because air conditioning's ownership rate in Europe overall is estimated to be just around 20%.
Basically, there's a large gap between the increasingly hot summers and also the existing stock of cooling equipment.
I think more and more cooling is
Going to be increasingly viewed, not just in Europe, but other parts of the world, not just as a luxury, but also a health and infrastructure necessity because a lot of global heat waves are generating a lot of deaths.
So I think in this scenario of climate change, it's not just about altering the energy market.
It's also about changing the type of products that consumers demand.
And China exported nearly $3.8 billion worth of air conditioners to the EU in the first half of this year, with portable units growing by more than 70%.
So what does this tell us about China's ability to quickly adapt products to the specific needs of overseas markets?
X.Y.
Yeah, so I think the 70% of portable units increase is definitely you know the magnitude of this year's only
We can kind of expect it to grow by success 60 70% year on year, I think this reflects some you know emergency purchases or.
When a company has depleted its inventory.
But I do think that the underlying direction is structural.
So the European Commission has estimated that between the 10 years from 2020 to 2030, the number of room air conditioners in the EU would be estimated to double.
So I think these portable and installation-free products is also going to address a lot of the European constraints because a lot of European customers live in rented apartments or historic buildings or properties where it's not allowed for drilling through walls.
So I think these installation-free products can solve this problem
And also avoid, for example, the long waiting periods for professional installation.
So I think the market is also moving towards the so-called dual purpose systems.
A lot of European homes are designed to preserve heat in winter, but not for creating
You know, cool air in the summer.
But I think in the future, a lot of air conditioners are also reversible.
They could provide both summer cooling and winter heating.
I do think, you know, it's not just temporary sales surge, but, you know, it's also occurring with the long-term structural expansion as well.
And in the past, China's manufacturing strength was often associated with low-cost production.
So is that still an accurate way to understand China's competitive advantage today?
Or how important have the innovation, the supply chain integration, speed to markets and industrial ecosystem become today?
In defining China's global competitiveness?
Yeah, so I do think low cost is still a relevant factor because if the product is not affordable, I don't think the European customers are going to be so willing to purchase it.
And purchase the products from China.
But I do think the real advantage is behind the low cost is usually the industrial ecosystem because we want to manufacture an air conditioner.
It requires the manufacturing of compressors, motors, heat exchangers, electronic controls, sensors, so on and so forth.
So it takes a...
Complete supply chain to kind of supply the product in a short period of time.
And I do think innovation is also increasingly embedded in these ordinary consumer products.
If you look at the air conditioning that a lot of Chinese households are using, you could, for example, speak through them.
You could control them using Wi-Fi or your phone.
So I do think that in the future, a lot of these private companies are going to adjust to the market through innovation, through these very advanced industrial ecosystem.
And China's manufacturing competitiveness is not just about lower demand, but also in terms of how to increase the scale, increase the capability.
Also, having the exceptionally fast commercialization cycle when it comes to new products and new demands.
And the EU has adopted a tough trade stance towards China, but European consumers continue buying Chinese products in large numbers.
So what does this tell us?
Does it reflect a gap between their industrial policy and the market realities?
I do think there's a tension between the regulators and also the consumers, as well as the manufacturers in China.
But I don't think it's a contradiction, as you mentioned, because these European trade policy, they usually directed at particular sectors.
Or sectors that provide subsidies, but they do also have to adjust to the needs of local consumers.
So the example of air conditioner is really showing how much the limit of these
These policies are going to change, especially when there are new demands.
So despite of these, basically the trade stance or the tougher trade policies, we see that EU consumers are already having this basically dependence on Chinese devices.
And this dependence is not just in
Consumer products.
In other commercial or manufacturing sectors, there's also almost an interdependence on Chinese products, also in Chinese machinery as well.
Overall, I think this case is showing a gap between the ambitions behind these strategies and also in terms of the short-term market demand and short-term market capacity.
European regulators may want to have these policies to support a greater industrial autonomy, but achieving it also requires to build
Competitive alternatives, not just, you know, having a policy and expect everyone to kind of live with it.
And finally, does this also reflect a broader transformation in China's manufacturing from being made in China evolving into a new model designed for the world?
What does it shift mean for China's long term competitiveness?
Yeah, I do think that design for the world is a good interpretation.
I do think that we're not just designing a most advanced
Model for China and then simply shipping it overseas.
We're seeing that, for example, in the case of air conditioner, they're redesigning products around the European requirements, European rental practices,
Also in terms of the structure, in terms of the installation.
So we're kind of designing a proper products, not necessarily the most advanced product for the destination country.
So I do think that this ability to customize and also manufacture and design in a very short period of time is going to be the future of new so-called from made in China to design for the world transformation.
And I do think this is reflecting a transformation from a standardized contract-based manufacturing towards a customized product-based or demand-based manufacturing.
So this is overall a reflection or implication of China's increasingly strong manufacturing capacity.
That was Li Lun, Assistant Professor of Economics at Peking University.
This is World Today.
Stay tuned.
Welcome.
I am Chuchu Zhang, Deputy Director at the Center for Middle Eastern Studies at Fudan University.
On the World Today program, we will dive beyond the headlines to uncover the stories, trends, and impacts that connect states across the globe.
Join me on World Today.
Welcome back.
US President Donald Trump has announced new tariffs on imported generic drugs in a bid to encourage pharmaceutical manufacturing in the United States.
Under the plan, imported generic drugs will remain tariff-free for two years beginning next month.
The tariff will then rise to 100% for one year before increasing to 200% thereafter.
Trump says companies that fail to build manufacturing facilities in the U.S. during the transition period will face the higher tariffs.
For more, Lian Qingxuan spoke with Professor John Ghosn with the University of International Business and Economics.
Why did Trump roll out this new tariff policy at this particular moment?
And why single out generic drugs specifically?
After exempting generics from April's pharmaceutical tariff plan, what has changed to trigger this shift?
Yeah, well, first of all, we all understand that the meaning of generic drugs means that these are drugs whose patents have already expired.
These are basically commodity products priced much, much lower.
And they also constitute a big chunk of the pharmaceutical prescriptions in the United States.
So there's a huge demand for that.
Now, my understanding is that practically close to 100% of the generic drugs sold in the United States are actually made outside the United States.
A lot of it made in India.
So obviously what Trump is trying to achieve is to drive the production of these or the manufacturing of these generic drugs back to the United States.
I think the impact is going to be most severe on companies based in India.
They are suppliers to
The big pharmaceutical companies in the United States, essentially forcing the pharmaceutical companies to start the last stage of manufacturing, that is the making of pills or other capsule drugs in the United States.
That's the idea.
Essentially, it's America's first strategy trying to make things in the United States.
As you mentioned, Trump says the tariffs are meant to bring generic drug production back to the U.S.
So can tariffs really achieve that goal?
I think it can somewhat achieve that goal, but not so much in substance, in my view.
We have to understand the making of this trust consists of several steps.
First of all, you have to have the ingredients right.
What's called the pharmaceutical compounds made, and then use these compounds to make the final pills or capsules.
I think it's very easy for American pharmaceutical companies to do the last stage
That is the making of the pills and capsule drugs in the United States.
If they are forced to do so, well, I mean, even that takes a bit of investment, I guess.
But that's quite doable in my view.
I mean, that's just like not that much of a complicated manufacturing process.
But nevertheless, you have to, you know, set up facility.
You have to do what's called a GMP certification process.
Make sure it's up to the standards, and then you make these pills.
But in that way, the compounds are still imported from other countries.
China is also a big producer of compound.
India also is a big producer of compound.
If you look at the division of gains in this value chain,
Of course, most of the gains are associated with the development of the drug, and then you had the compound making, and then eventually pill making.
So pill making captures a fairly small percentage of the total value added in this value chain.
So even though it is going to create some American investment, American jobs, but I don't think it's going to be too much of an impact on the economy.
I think President Trump's objective of driving this production back to the United States, it's probably going to be overestimating over the benefits that's going to be generated.
It's not going to create a whole lot of jobs here.
The process itself is not highly automated anyway.
So, you know, that's my sense.
The policy includes a two-year zero-tariff grace period before steep tariffs kick in.
So how should we interpret this timeline design?
Yeah, this is meant to be buying some time for these pharmaceutical companies.
I mean, investment is not going to happen overnight.
You know, you need planning to find a site.
You need to do the construction.
You need to set up equipment.
You need to have a process, certification, testing of the process.
And then eventually things can be coming out of this process.
It's a lengthy process.
It's highly complicated.
It's going to need some time.
I think that two year period is meant to be buying some time for the pharmaceutical companies so that they can start the process, take the initiative and get things rolling, I guess.
So they need some time and President Trump gave them some time.
And some observers know that the higher tariffs will take effect late in this presidential term.
So what political and commercial calculations may be behind this move?
Well, I mean, this is definitely something that can be boasted about in the election cycle.
President Trump can say that, look, you know, I forced these pharmaceutical companies to back to the United States.
These don't make the American products, blah, blah, blah.
I mean, he can boast about these things.
But again, I think the net impact on the economy
It's not going to be that much in my view.
So it's politically important, particularly convenient, but in substance, it generates very little in my view.
And which countries are likely to be hit the hardest by this policy?
As you've said, China and India.
Mostly India, I would say.
I mean, look at the generic drugs are mostly coming from the India companies.
India is a fairly large and also quite affordable drug making industry.
India has the world's largest population.
Certainly there's a need for affordable drugs.
So quite many of those drugs, particularly generic drugs.
You have to pay patent for made in India and exporting of these drugs to the United States, the big business for the Indian pharmaceutical industry.
I think they stand to be impacted more severely than anything, any country other than India.
China might be impacted at all, as I said, but I don't think it's going to be a huge impact on China's economy.
And how do you expect this tariff to reshape the global generic pharmaceutical supply chain?
I think it's going to be more balkanized.
I guess it used to be a highly traded market.
In other words, you have international trade going on.
These developing countries like India and China export a lot of these products to the developed world.
With America taking this policy, I think this trade is probably going to be severely impacted, I guess, some.
Politicians in the United States can argue, you know, it's more than just about creating jobs in the United States.
It's all about supply chain security.
They can argue that drug is also a national security issue.
But, you know, it's a very thinly stretched argument, in my view.
I mean, I haven't seen an example that a country's national security was impaired indeed in the past because of some other country's boycotting supply of drugs to that country.
That has never happened.
So I think it's a fairly flimsy argument, but we'll see what's going to happen.
How could these tariffs affect U.S. drug prices, medicine supplies, and patients, etc.?
Yeah, one thing I think I'm pretty certain is that the drug prices for these generic drugs are going to be more expensive.
They used to be quite cheap, actually, right?
After patents are spied, the cost goes up.
Can be substantially decreased in essentially manufacturing costs.
I think this thing is going to deny some American families access to cheap drugs, especially people whose pocketbooks are very stretched in these days because of the high tariffs, high inflation.
I guess some Americans are not going to be very happy with it.
The Trump administration intends to defend these tariffs under Section 232, citing national security.
So from an international trade and WTO rules perspective, how defensible is that justification legally and economically?
This is a technical issue here.
The Supreme Court has deprived President Trump of imposing tariffs at his will.
So he has to find some other tools in the toolbox related to trade.
And this article in the trade law is something he can use quite conveniently.
As I said, he's using this as a tool.
National security argument.
And as a result, it justifies imposing tariffs for their purpose based on the United States legislation in the past.
Nevertheless, as I said, you know, a generic jug being a national security issue, it doesn't hold much water, you might say.
You know, as I said, nobody's going to deny American consumers to have access to these cheap drugs.
And usually for generic drugs, there's also readily available.
Competition is out there other than just
Single sourcing from India.
So I don't think this is much of a national security argument at all.
And even that's the case.
I mean, American pharmaceutical companies can ramp up production if they want when it comes to a moment like this.
It's not going to be a national security issue, but technically it means to impose tariffs, basically.
That was Professor John Gong with the University of International Business and Economics.
And that's all the time for this edition of World Today.
I'm Duohong Yu in Beijing.
Thank you so much for listening.
Bye for now.
